Is Now the Time to Think About Buying Real Estate

This is the burning question among investors and individuals alike who are thinking about buying property. Whether it is residential, commercial, or any other type of property there are pros and cons to this argument. My feeling is that pros far outweigh the cons...right now!

PROS
Over the past three years property values have declined anywhere from 28 to 45 or even higher percent depending on the area of the country you are looking at. These historic price declines mean we're looking at prices that resemble the late nineties. I bought my home in 97 for 101k and in 99 it was worth 139k. Today it's worth about 155 thousand dollars.

Interest Rates are also at an historical low. Hovering around 5% we've not seen these numbers since sometime before most of us were even born. I've looked at records going back as far as 1962 and in 1965 interest rates were at their lowest until now at 6 3/4%.

Inventory is at an all time high. Most Real Estate listings across the nation are showing around a 10 month absorbsion  rate and have been for some time now. This means that at the present level of sales it would take 10 months to sell everything listed today. With foreclosures speculated to remain at the highest level they've been since this all began this rate will likely remain very close to the same for 2011. As the number of new foreclosures begin to decline--as predicted--in 2012 we still have the vast shadow inventory sitting in possession of the banks. These bank owned properties will continue to enter the market place even though new foreclosures are slowing, thus keeping inventory levels high for years to come.

Opportunity abounds. As just mentioned foreclosures remain high meaning a lot of people are still struggling with their loans. This creates not only foreclosure opportunity but also short sale opportunity. Both of which sell below current market value providing plenty of opportunity to find a great deal, over and above these already low property values.

CONS
All the same factors can also be looked at as cons to this argument. Property values are expected to continue on the decline for at least the next 6 months. Interest rates are projected to increase over the same period. Large supply leads to lack of demand, and short sales and foreclosures can be a hassle to buy.

Let's work backwards:
Short Sales and Foreclosures can be a hassle; Well if you want a great deal...deal with it. Otherwise go pay full market value and still get a pretty darn good deal.

Supply is so high many are thinking "hey what's the rush". There are so many good deals out there many still are afraid to jump in thinking there's still a possibility they could lose.

The two biggie's property values and interest rates we'll look at in tandem. Property values are expected to drop another 5 to 7 percent in most areas with a few areas expected to decline another 10%+. Even at a 12% decline in value is a 5% interest rate better in the long run than 7%. We don't know that interest rates will reach 7% this year but they are projected to increase. My guess is just over 6% by the end of the year. So what you the buyer must decide is whether or not today's price coupled with the lowest interest since sometime prior to the 60's will make a better deal for you, than tomorrows lower price coupled with a higher interest rate.

I say "Right Now" is "The Best Time to Buy". Property values will eventually climb again--possibly as soon as next year. Interest rates however will not look back once they start back in an upwards direction. I say get the great rate now, and ride out the storm on value. Five years from now everybody is going to be wishing they bought now instead of waiting just one more year, maybe even less than that.

You are welcome to disagree with my opinion, that's what makes this country great, but even if you're not going to buy today you should at least start your serious evaluation of the market and make your decision to buy at the right time--very soon.

Now for those of you read this whole post and said "well it doesn't matter to me since I can't get financing anyway", go out and look for the properties advertising  "Seller Financing Available". These sellers are offering to be the bank for you. They are much more flexible on who they can sell to. Just make sure both you and the seller contact a mortgage note specialist to assist you with questions on deal structuring and note creation that will create an overall deal that suits both you the buyer and, the individual who is willing to take this huge risk on you. Creating a win/win situation from the outset will keep all parties involved happy throughout the entire term of the contract.

Of course I encourage you and your seller to contact me directly at
530-318-2662 (info@psrnote-ability.com) for the assistance you need.